June 16 (Bloomberg) -- CQS U.K. LLP, the London-based firm
founded by Michael Hintze, plans to restrict new investments
into a hedge fund that trades mortgage-backed securities once
its assets under management reach $2 billion, according to a
letter sent to clients.

The CQS ABS Fund, which has gained 35 percent a year on
average since 2006, currently oversees $1.6 billion, according
to the letter obtained by Bloomberg News. CQS said it’s
instituting the so-called soft close because it wants to manage
assets “carefully and thoughtfully,” the letter said.

Firms are increasingly closing funds as the hedge-fund
industry rebuilds the asset base it lost after 2008 when the
collapse of Lehman Brothers Holdings Inc. roiled financial
markets. SAC Capital Management LLC, the Stamford, Connecticut-based company founded by Steve Cohen, told investors last month
it may stop accepting money into its largest hedge fund to
ensure returns remain high.

CQS spokesman Michael Rummel declined to comment on plans
to restrict investments into the ABS fund. The decision was
reported earlier today by the Financial Times.

CQS, which was founded by Hintze, a former Credit Suisse
Group AG credit trader, instituted a soft close of its $1.35
billion directional opportunities fund last year to new
investments. The firm oversees a total of $11 billion. A soft
close typically means that a fund will consider accepting money
from existing clients or will replace redemptions with new
investments.

The ABS fund, which is run by Chief Investment Officer
Alistair Lumsden, has been boosted by its trades in the U.S.
mortgage market. The “opportunity set remains strong” in the
markets the firm invests in, it said in the letter to clients
this week.